The pact with L&T comes at a time when Areva is under fresh fire over weak spots in the steel of the EPR nuclear reactor it is building for utility EDF in Flamanville...

The pact with L&T comes at a time when Areva is under fresh fire over weak spots in the steel of the EPR nuclear reactor it is building for utility EDF in Flamanville, according to findings released by French nuclear regulator ASN on April 7. (AP)

A deal signed between engineering firm L&T and French nuclear vendor Areva for maximising the localisation of critical components for the proposed 10,000-MW nuclear power plant at Jaitapur marks a desperate attempt to prune the cost of each of the six 1,650 MWe (mega watt electric) reactors to be deployed at the site in Maharashtra to about $4 billion. This is expected to translate into a generation cost equivalent of about Rs 7 per unit.

The meeting of this price cap imposed by the government during the ongoing technical negotiations, officials said, holds the key to the viability of the Jaitapur project, especially in light of Areva’s chequered track record at implementing EPR reactor-based projects elsewhere in the world. The targeted cost of $4 billion (approx Rs 25,000 crore) per reactor is roughly the same as the Areva offer to the Chinese for the two EPR reactors under construction at Taishan in China, which is believed to incorporate an engineering joint venture, unlike the Indian project proposal. “We are insisting on a price cap to ensure that both Areva and NPCIL (Nuclear power Corp of India Ltd, the state-owned project operator) work with an upper limit on costs in mind,” an official involved in the exercise said. The L&T venture for localised production is key, especially in light of the Taishan (EPR project in China) experience, he said.

The EPR, or European Pressurised Reactor, is a new-generation pressurised water reactor, built to resist the impact of a commercial airline crash. At 1,650 MWe a reactor, it has come under fire for being too big and too expensive and Areva has been forced to book billions of euros in provisions due to cost overruns.

Areva’s EPRs are being deployed at two sites in Europe — Flamanville, France and Olkiluoto, Finland, apart from the two in Taishan,China. The construction of the Finnish reactor being built at Olkiluoto since 2005 has repeatedly suffered from serious delays and cost overruns. The reactor was planned for commissioning by 2009 and five years on, it’s still far from ready. Its cost has doubled and there are doubts on whether it will be ready even by the revised deadline of 2018.

The other EPR reactor at Flamanville in France is also having problems. Construction was started in 2007 and was supposed to generate power by 2012. That, too, is delayed and is now scheduled to start in 2016.

The L&T deal signed earlier this month is expected to get orders for making heavy and critical components such as pressure vessels and steam generators and these orders will be executed by L&T Special Steel and Heavy Forgings, a joint venture between L&T and the Nuclear Power Corporation of India. This venture has a manufacturing facility in Hazira, Surat. “Localisation is the only way to bring down cost, especially as the NPCIL has been driving a hard bargain on tariffs being capped at Rs 7 per unit (kWh),” a company official said.

The pact with L&T comes at a time when Areva is under fresh fire over weak spots in the steel of the EPR nuclear reactor it is building for utility EDF in Flamanville, according to findings released by French nuclear regulator ASN on April 7.

ASN said Areva had informed it that tests at 2014-end had shown that in certain zones of the reactor vessel and cover of the EPR there was a significant concentration of carbon, which weakens the mechanical resilience of the steel and its ability to resist the spreading of cracks. In India, the cost benchmark for new imported light water reactors such as the EPR are derived broadly from the two Russian designed VVER-1000 reactors which are to be deployed at the Kudankulam site. The two new VVER reactor units (KKNPP 3 & 4) to be set up in Tamil Nadu, which would come up at the Kudankulam site where two identical units (KKNPP 1 & 2) are nearing commissioning, entail a sanctioned project cost of Rs 39,849 crore for the two new reactors.